Ethnic Fractionalization, State Fragility and Economic Growth in Developing Countries: A Case of Sub Saharan Africa (SSA)

This study was aimed to investigate the link between ethnic fractionalization, state fragility, and economic growth in developing countries. 80 countries (41 from SSA and 39 from HICs) were chosen obtaining panel data spanning the years 2007 to 2020. The relationship between the three variables was estimated using the Seemingly unrelated regression (SUR) approach, with the direct influence of ethnic fractionalization on economic growth assessed first, followed by an estimate of its indirect effect via the transmission channels. The estimated empirical results revealed that ethnic fractionalization had a minimal effect on economic growth in both SSA and high-income countries. In terms of the indirect effects of the two elements on growth, there were mixed results, with some transmission channels putting a negative strain on economic growth and others imposing a positive one. In addition, we fail to confirm the assumption that ethnic fractionalization would have a strong negative impact on growth in countries where state fragility is higher. Thus, we assert that “the conventional wisdom” in the literature about the negative relationship between growth and ethnic variety could not be well-founded and robust, and that further investigation could clear up the impurity in the field.